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Leap Wireless Posts Mixed 4Q

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Leap Wireless International Inc. declared financial results for the fourth quarter of 2012, in which the bottom line topped the Zacks Consensus Estimate but the top line missed the same. However, the company continues to suffer huge losses despite beating the Zacks Consensus Estimate.

Additionally, Leap Wireless suffered a significant amount of net subscriber losses in the reported quarter. In the fourth quarter of 2012, the company’s consolidated customer churn rate was 4.6% compared with 3.9% in the prior-year quarter.

Quarterly total revenue was $756 million, down 1.5% year over year and way below the Zacks Consensus Estimate of $784 million. Service revenue was $700.2 million, down 4% year over year. Equipment revenue was $55.8 million, up 47.3% year over year.

Net loss, in the fourth quarter of 2012, was $74.3 million or a loss per share of 96 cents compared with a net loss of $84.4 million or a loss of $1.10 per share in the prior-year quarter. Quarterly adjusted losses per share of 80 cents were narrower than the Zacks Consensus Estimate of a loss of $1.51. Quarterly cash cost per user (primarily indicating carrier subsidy for new smartphone) was $24.38, up 8.5% year over year.

Quarterly gross margin was 41.4% compared with 40.1% in the prior-year quarter. In the third quarter of 2012, operating income was $60.6 million compared with an operating loss of $3.5 million in the prior-year quarter. Quarterly adjusted OIBDA was $148.2 million, up 9.7% year over year. In the reported quarter, adjusted OIBDA was 21% of the service revenue compared with 19% in the year-ago quarter.

During the fourth quarter of 2012, Leap Wireless generated $33.4 million of cash from operations compared with $119.4 million in the prior-year quarter. Free cash flow, in the reported quarter, was a negative $29.4 million compared with a negative $33 million in the year-ago quarter.

At the end of 2012, Leap Wireless had over $675 million of cash and marketable securities compared with $751 million at the end of 2011. Total debt, at the end of 2012, was over $3,302.5 million compared with $3,220.7 million at the end of 2011. At the end of 2012, debt-to-capitalization ratio was 0.88 compared with 0.84 at the end of 2011.

Subscriber Statistics

During the fourth quarter of 2012, Leap Wireless lost around 337,035 net customers against a gain of 178,889 customers in the year-ago quarter. In the reported quarter, the company lost a total of 202,000 wireless voice customers and 135,035 wireless broadband subscribers.

Total subscriber base, at the end of 2012 was 5,296,784, exhibiting a 10.7% year-over-year drop. Voice churn rate was 3.7% compared with 3.5% in the year-ago quarter. ARPU in the reported quarter was $42.73, up 1.5% year over year. Quarterly cost per gross addition soared up 52.5% year over year to $363.

Other Stocks to Consider

Leap Wireless currently has a Zacks Rank #3 (Hold). Other major prepaid wireless service providers in the U.S. include MetroPCS Communications Inc. , Sprint Nextel Corp. (S - Analyst Report) and America Movil S.A.B. (AMX - Analyst Report). All these three stocks currently have a Zacks Rank #3 (Hold).

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